On May 25th, the NCUA Board approved a NAFCU-sought proposed rule to amend NCUA’s regulation on charitable donation accounts (CDAs) to allow donations to 501(c)(19) veterans’ organizations. Currently, the rule only permits donations to 501(c)(3) organizations. Because of the proposal, I thought it would be a good time for a refresher on CDAs.
NCUA regulation, section 721.3(b), permits a credit union to make charitable donations and create charitable donation accounts. Under the rule, a “charitable donation account (CDA) is a hybrid charitable and investment vehicle, satisfying the conditions in paragraphs (b)(2)(i) through (vii) of this section, that you may fund as a means to provide charitable contributions and donations to qualified charities.” In other terms, a CDA is like a charitable foundation but for credit unions. While credit unions are limited by Part 703 and the Federal Credit Union Act in what investments they can make, credit unions can make donations to a CDA, free from the investment limitations, if the credit union satisfies paragraphs 721.3(b)(2)(i) through (vii).
Paragraphs (b)(2)(i) through (vii) place the following requirements on a CDA:
- The aggregate book value of a credit union’s investments in all CDAs must be limited to 5% of the credit union’s net worth at all times, as measured in every quarterly Call Report cycle;
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